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Do natural resource sectors rely less on external finance than manufacturing sectors?

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  • Hattendorff, Christian
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    Abstract

    The finding that industrial sectors differ in their dependence on external finance for sector-specific technological reasons and, thus, rely to a different degree on financial development has become a major concept in studies conducted on both growth and trade. Although natural resources might play an important role in each of these fields, research on industries' financial dependence has been limited so far to manufacturing. By focusing on the natural resource sectors, the present paper aims to close this gap in its analysis. It rejects the common view that the natural resource industry in particular is less dependent on the financial system, and finds that the results of the analysis depend on the specific measure being applied. Measures relating investment and cash flow indicate high external dependence, while measures accounting for more short-term liquidity needs demonstrate rather low external dependence of natural resource firms. These results do not change considerably over time or across countries. --

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    Bibliographic Info

    Paper provided by Free University Berlin, School of Business & Economics in its series Discussion Papers with number 2012/17.

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    Date of creation: 2012
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    Handle: RePEc:zbw:fubsbe:201217

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    Keywords: Financial development; external dependence; natural resources;

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    1. von Kalckreuth, Ulf & von Furstenberg, George M., 2006. "Dependence on external finance: an inherent industry characteristic?," Discussion Paper Series 1: Economic Studies 2006,30, Deutsche Bundesbank, Research Centre.
    2. Hetschko, Clemens & Quint, Dominic & Thye, Marius, 2012. "Nationale Schuldenbremsen für die Länder der Europäischen Union: Taugt das deutsche Modell als Vorbild?," Discussion Papers 2012/12, Free University Berlin, School of Business & Economics.
    3. Eichengreen, Barry & Gullapalli, Rachita & Panizza, Ugo, 2009. "Capital account liberalization, financial development and industry growth: a synthetic view," POLIS Working Papers 128, Institute of Public Policy and Public Choice - POLIS.
    4. Vlachos, Jonas & Svaleryd, Helena, 2001. "Financial Markets, the Pattern of Specialization and Comparative Advantage. Evidence from OECD countries," Working Paper Series in Economics and Finance 449, Stockholm School of Economics, revised 03 Sep 2001.
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